KAM fingers taxes that will spike cost of food

Friday, May 26th, 2023 06:00 | By
Photo illustration of tax.
Photo illustration of tax. PHOTO/Internet.

Captains of industries have signalled a further increase in the cost of staple food, including sifted maize flour, should the National Assembly pass the Finance Bill 2023 in its entirety.

Through their lobby association, the Kenya Association of Manufacturers (KAM), they said the imposition of a 10 per cent export levy on imported kraft- a strong, smooth brown wrapping paper- which is used to package staple foods like maize, wheat, cassava and millet flour will spike the cost of commodities.

This, according to KAM chairman Rajan Shah, “will come with a direct negative impact of increasing the cost of packaging Unga for consumers.”

“We are living in challenging times when the cost of living is at an all-time high. Our focus as a country must be on reducing the cost of commodities and sustaining our economy. We urge the government and National Assembly to consider the views from all stakeholders, including citizens and the business community, before adopting the proposals in the Finance Bill, 2023,” he said.

KAM’s concerns mirror those of the general public, who gave the Kenya Kwanza administration their ruling mandate through the September 2022 General Election, trusting the ruling coalition party to stabilise the cost of living. Shah said the proposed “levy comes at a time when the mwananchi is unable to put up with the inflated cost(s).”

The rising cost of basic commodities is a hot “political potato” that has stirred agitation with the Raila Odinga-led Azimio La Umoja One Coalition Party scoring social capital through political demonstrations to compel authorities to consider policies that would lower the cost of leaving.

This has in turn stirred the government into action, toying with several ideas, including commissioning the Kenya National Trading Corporation to import tax free cooking oil, sugar, wheat and beans as well as engaging the United Arab Emirates (UAE) Government in a deal to import oil on credit in order to fight inflation.

And as policymakers and legislators scratch their heads on how to raise money domestically to meet government objectives in the coming financial year beginning July 2023. On the other hand, KAM, is worried that the plethora of levies and excise duties in the proposed Bill will render an estimated 100,000 Kenyan’s in the cement sub-sector jobless, collapse the leather tanneries and manufacturers of the confectionery products, the latter who also risk being run out of town because of losing out to regional competitors.

According to Shah, the imposition of a 10 per cent levy on imported clinker goes against an earlier decision reached between cement manufacturers, the Ministry of Investment, Trade and Industrialisation as well as KAM to stay the levy until 2026 will delay a cumulative Sh100 billion investment by the cement firms in clinker manufacturing. Imported clinker constitutes 60-70 per cent of inputs meant for cement production.

“The proposed import levy will do less to protect the local clicker producers and instead, it will lead to importation of cheaper finished cement from EAC partner states which may lead to the loss of over 100,000 jobs. This philosophy will be replicated in the other proposed sectors including billets, wire rods and, kraft (paper products),” Shah said. He said the proposal to reduce the rate of levy on raw hides from 80 to 50 per cent was ill-advised as the proposal will lead to a shortage of raw hides and skins and subsequent closure of related industries. “The reduction of the export levy to 50 per cent will lead to the collapse of the sector, jobs losses as well as loss of government revenue,” Shah said. Currently, Kenya has 13 tanneries producing approximately 5,000 metric tonnes of raw hides and skins monthly and operates below capacity for a lack of raw materials.

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